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What a hardship

Martha Stewart agreed to pay $195,000 to settle civil insider-trading claims yesterday, marking the end of a long and costly legal battle that sent her to prison only to reemerge as a celebrity on television and in her namesake magazine.

The settlement, which requires court approval, resolves civil charges against Stewart stemming from her December 2001 sale of stock in ImClone Systems Inc. Securities and Exchange Commission lawyers argued that Stewart took advantage of inside information to avoid $45,673 in losses before a negative announcement about ImClone's signature cancer drug. Two years ago, a jury convicted Stewart of lying to investigators about the sale.

The exact toll of the five-year probe on Stewart's pocketbook remains elusive. But yesterday's $195,000 penalty, an earlier $30,000 criminal fine, and legal fees that her spokeswoman said two years ago prompted her to sell nearly $5 million worth of her company's stock far surpass the losses she averted by unloading 3,928 ImClone shares.

That sale, after a tip from then-Merrill Lynch & Co. broker Peter E. Bacanovic, triggered civil and criminal investigations that ultimately sent Stewart to a women's prison in Alderson, W.Va., for five months and forced her to spend several more months wearing an ankle bracelet while confined to her home in the fashionable New York City suburb of Bedford, N.Y.

Executives at Martha Stewart Living Omnimedia Inc., the New York company Stewart founded, watched its stock price fall as the case culminated in her 2004 conviction for obstructing the probe. Stewart estimated to a reporter for the New Yorker magazine in 2003 that she had suffered losses of some $400 million based on the company's deflated share price, diverted business and her legal bills. Insurance eventually covered at least $2.8 million of her legal fees. Stewart later said that 200 of her employees had lost jobs "as a result of this situation."

She collected $1.26 million last year in salary and bonuses, according to securities filings. Stewart owns 29 million shares, about 55 percent of the outstanding shares, in her company, a spokeswoman said.

After leaving prison early last year, Stewart, 65, resumed a lead creative role at the company. The SEC settlement, which bars her from serving as a board member of a public company for five years, will have little immediate impact. Stewart had already ceded the top job to former ABC television executive Susan M. Lyne and has steered clear of the accounting practices and legal compliance issues that she is forbidden to oversee under the terms of the SEC deal.

"This brings closure to a personal matter and my personal nightmare has come to an end," Stewart said yesterday in a statement issued through her publicist.